From Appraisal to Freedom: How a PMI Removal Appraisal Can Save You Thousands
My home appraisal saved me money!
Are you tired of paying for private mortgage insurance (PMI) every month? You can remove it and save thousands of dollars!
PMI is typically required when you put down less than 20% on the purchase of a home, but once you reach the equity threshold of 20%, you may be eligible for PMI removal. That's where our home appraisal for PMI removal comes in. By getting a PMI removal appraisal and showing that your home has increased in value, you can show that you have the required equity to SAVE MONEY! This process can save you hundreds of dollars each month and thousands of dollars over the life of your loan. This appraisal blog post will explore how our Virginia home appraisal services can get you started on financial freedom.
Understanding PMI - What is it, and why do you need it?
Private mortgage insurance, or PMI, is a type of insurance that lenders require borrowers to purchase when they put down less than 20% on their home. PMI protects the lender or loan servicer if the borrower defaults. Essentially, PMI is a safety net for the servicer of the loan. It allows them to recover some of the money they lent out if the borrower cannot make their mortgage payments.
PMI is often included in your monthly mortgage payment, and the cost can vary depending on your loan amount, down payment, and credit score. The average price of PMI is between 0.3% and 1.5% of your loan amount per year. For example, if you have a $200,000 mortgage and your PMI rate is 1%, you would pay $2,000 per year, or $166.67 monthly, for PMI. PMI Calculator
When can PMI be removed?
The good news is that you don't have to pay PMI forever. Once you reach a certain amount of equity in your home, you can remove PMI. The specific requirements for PMI removal can vary depending on your loan servicer, but you can follow some general guidelines.
According to the Homeowners Protection Act (HPA), you can request PMI cancellation once you reach 20% equity in your home and have paid off 20% of your original loan amount, either through mortgage payments or an increase in your home's value. However, some lenders may require you to have a higher amount of equity before they remove PMI although this is rare.
Additionally, if you have an FHA loan, you can only remove PMI once you have paid off the loan in full. You will pay PMI for the entire loan term unless you refinance to a conventional loan.
It's important to note that even if you reach the required amount of equity, your lender may not automatically remove PMI. You will need to request PMI removal and prove that you have the equity necessary amount. This is where the appraisal process comes in.
The home appraisal process - What to expect
To remove PMI, you must have a real estate appraisal done on your home. A real estate appraisal is an assessment of your home's value by a licensed or certified home appraiser. Our Virginia home appraisers will look at various factors, such as the size of your home, the number of bedrooms and bathrooms, and the condition of your home, to determine its market value.
The appraisal process can be nerve-wracking, especially if you are unsure what to expect. Here's what you can expect during the appraisal of a home by Premier Home Appraisals:
1. You must schedule an appointment with a licensed appraiser or easily purchase a home appraisal online from us.
2. The real estate appraiser will come to your home and conduct an inspection. They will measure the square footage of your home, take photos, note any upgrades or improvements you have made, and more. Our clients receive a handy appraisal checklist after purchasing a Virginia house appraisal online.
3. The home appraiser will compare your home to similar homes in your area that have sold recently. This is called a "comparable analysis."
4. The appraiser will provide a detailed report that includes their professional appraisal value estimate.
Once you have the appraisal report, you can use it to determine whether you have reached the required amount of equity to remove PMI.
The PMI removal appraisal costs $475 for a full detailed interior inspection with Premier Home Appraisals.
Calculating your home's equity - How much do you need to remove PMI?
You will need to do some math to determine whether you have reached the required amount of equity to remove PMI. Here's how you can calculate your home's equity:
1. Take your home's current value, as determined by the home appraisal.
2. Subtract your outstanding mortgage balance.
3. Divide the result by your home's current value.
4. Multiply the result by 100 to get a percentage.
For example, if your home is currently worth $300,000 and your outstanding mortgage balance is $240,000, your equity would be 20% ($60,000 / $300,000 x 100). If you have reached the required amount of equity, you can request PMI removal from your lender or loan servicer.
How to remove PMI - The steps you need to take
To remove PMI, you will need to follow a few steps:
Determine if you have reached the required amount of equity. Use the appraisal report to calculate your home's equity.
Contact your lender and request PMI removal.
Provide proof of your home's value, such as our Virginia home appraisal report.
Provide proof of your equity, such as a statement showing your outstanding mortgage balance.
Wait for your lender to approve the PMI removal.
It's important to note that your lender may have specific requirements for PMI removal, so be sure to ask them what you need to provide.
The benefits of PMI removal - How it can save you thousands
Removing PMI can have a significant impact on your finances. Here are a few ways it can help:
1. Lower monthly mortgage payments - Once you remove PMI, your monthly mortgage payment will be lower. This can free up your budget for retirement savings or paying off debt.
2. Savings over the life of your loan - Removing PMI can save you thousands of dollars over the life of your loan. As we mentioned earlier, if you have a $200,000 mortgage with a 1% PMI rate and keep your PMI for the entire 30-year term of your loan, you would pay $60,000 in PMI premiums alone!
3. Increased home equity - Removing PMI means you have more equity in your home. This can be beneficial if you sell your home or take out a home equity loan.
Common PMI removal mistakes to avoid
Removing PMI can be a bit of a process, and there are some common mistakes you'll want to avoid:
1. Not knowing the requirements - What are the specific requirements for PMI removal from your loan servicer.
2. Not having enough equity - If you don't, your lender will not remove PMI.
3. Not having an accurate appraisal - Make sure you hire a licensed appraiser to provide an unbiased and reliable appraisal of your home's value.
4. Not following up with your lender - Your lender may require proof of your equity with a home appraisal valuation. Make sure you provide all the necessary documentation and follow up with your lender to ensure PMI removal.
Conclusion - Is it time to remove your PMI?
If you're paying PMI on your mortgage, it's worth exploring your options for PMI removal. Removing PMI can save you hundreds of dollars each month and thousands of dollars over the life of your loan. By getting a home appraisal for PMI removal and showing that your home has increased in value, you can show that you have the required equity to remove PMI. Just be sure to follow the specific requirements of your lender and avoid common mistakes. With PMI removal, you can be on the path to financial freedom.
Purchase your appraisal to remove PMI from your local certified appraiser in Virginia today!
Also, we provide home appraisal services by the best home appraisers near me, including an appraisal for a divorce and estate appraisals.
Matt and Troy
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